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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (2985)	2/14/1998 4:44:00 PM
From: Lazlo Pierce	Read Replies (2) \| Respond to of 18691

A part of thestreeet.com re: AOL by Herb Greenberg ************************* Soon-to-be TSC columnist Herb Greenberg casts a jaundiced eye at America Online's (AOL:NYSE) run-up this week on the strength of better-than-expected second-quarter earnings and a $2-a-month price hike for its online service. The stock traded above 117, an all-time high. Noting that AOL trades for more than 125 times current fiscal year earnings, Greenberg raises questions about the quality of those earnings. Second-quarter gross margins of 34.8% were down from 37.3% last quarter and 38.1% a year ago. "Traditionally, falling gross margins lead to lower earnings," he notes. AOL also disclosed that it had reversed a reserve of $17 million against networking costs. If the reversal hadn't occurred, AOL's gross margins would have been around 32%, and earnings would have missed analysts' estimates, Greenberg says. "Maybe AOL's fundamentals will grow into its stock," he writes. "But anytime a company raises prices it takes a chance that it'll lose customers."